Hey Zhadow…
I can help you think about this question.
First off, let me ask you this question.
Why are you asking this question in the first place?
I’ll help you.
You are wanting to trade, right? Apparently you are coming from the perspective of wanting to get in on a trend. I mean, that’s why you are trying to figure this trend stuff in the first place. Therefore, if you had a good idea about what constitutes a trend, then that would make your trading a little bit more easier. I get it.
Let’s step back a little. This is the thing. Everybody knows what a trend is. Even you. How about this. The weather. It can be unpredictable, but then again, it does trend. We all know that the weather men can’t always get it right, but a lot of times they do. It does trend. We will go through hot times, cold times, rainy times, dry times, snowy times, etc…The weather trends. And…it’s unpredictable. You know this.
Humans trend. I’m sure you’ve heard that humans are creatures of habit. Well, that follows a trend. Like, haven’t you ever done something over and over again until you’ve gotten tired of it? I used to get a breakfast sandwich every morning before work (wasn’t a good thing…but I can at least see that it was a season of doing something consistently). And many people behind the counter got to know me by name, during those times. So, in respects to humans, being the human behaviorist expert that I am, you can almost predict what a human will end up doing. Like how they will react to something specifically. Hopefully you know what I’m talking about.
That’s nice. Look. I have something written down. It goes like this. “Something stays constant until it changes.” What that really is saying is that something is trending until it changes. Think about that.
Now. Let’s talk about trading. I like how you articulated the fact that there can be trends inside of trends. So you are at least are aware of that. And you are aware of the different time frames.
In our trading, we first need to determine what time frame are we trading in. You’ve probably heard that you can be a scalper (being in a trade for such a short time period). Then when you zoom out a little bigger you can be a day trader (being in a trade before the end of the day ends). That could be some hours worth, right? Then there’s the swing trader. They (like me) can be in trades for a couple days to a week or two. You know, round about. Basically, those will be looking at end of day prices. Then out a little bigger will be those who are position traders. They hold out a little much larger. Like weeks to months out. They let it ride. Then last but not least is the investors. That’s kind of like the ‘buy and hold’ strategy. Mostly stocks.
Ok. So. There are some classifications for ya. On the broad side of things, but at least it puts some perspective on trading. Therefore, I should ask. What kind of trader, between those few types, are you?
- Scalper
- Day trader
- Swing trader
- Position trader
- Investor
Chances are you’re not the investor, or you wouldn’t be asking these questions, right?
But, my point is, you need to have a good idea of where you’re at. And look…you need to go in so much further also. I would be asking these questions to you.
- How long are you willing to let your trades run?
- What’s the minimum amount of time that you absolutely won’t touch a trade?
- What is going to tell you when you should be getting out of a trade? An indicator? Or a time frame?
These are some questions you need to reconcile first. See, all of this stuff should revolve around our trading. And then, once that is addressed, then you should delve into the trend stuff.
Look. When it comes to trends, there are a million ways to determine that. A lot of traders use indicators for that. For instance, a moving average. If it’s above a certain average (like the 200 ma), then it’s a bull trend. Likewise below that line a bear trend. I remember using fractals one time. All that is, is looking more at price action’s highs and lows.
The point is, there are a lot of different methods of finding out what the trend is. And guess what? Everybody can all be right…at the same time! Cause it all depends on what perspective you are coming from.
Therefore, you need to first know how you are going to trade. If you have some answers to those questions above, then you should have some kind of idea how you want to trade. And then, dive in a little deeper, and find out how you want to determine what the trend is. Chances are you won’t be too wrong about it.
Some traders say you don’t even need any indicators to know what the trend is. All you have to do is step back away from the screen…take a quick glance…from the left to the right…is it going up, or down? That would be your trend, right? And technically you won’t be wrong about that.
Everybody does know what a trend is. But it would be good for you to choose the best way that you think it is. Everybody will have a different method. Over the last few years I went through many different ones.
You also have to remember this. Our trading doesn’t (shouldn’t) solely rely upon whether we got in the trend or not. There are many other factors involved. How about…money management, risk management, wins vs losses, risk to reward ratio. Etc…
But, I think the most important factor in trading is time. Moreso than what a trend is. If you stay in a trade long enough, chances are very good that you will end up in profit, eventually. There is a guy in here that simply won’t lose because he won’t exit until he’s in profit. How about that huh? Do you think he’s concerned about what the trend is? Nope. He doesn’t care whatsoever. But he makes money anyway.
Sorry that this might be a lengthy post. I hope I gave you some things to think about.
Talk to me.
Is this a bunch of nonsense? Or not.
Mike